A Natural Monopoly Maximizes Profits at the Point at Which

question 153

True/False

A natural monopoly maximizes profits at the point at which price equals minimum average total cost.

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Definitions:

Fixed Cost

Expenses that do not change in the short term regardless of the level of production or output.

Average Fixed Cost

The fixed costs of production (costs that don't change with the level of output) divided by the quantity of output produced.

Marginal Product

The additional output resulting from a one-unit increase in the input of a particular productive resource, holding all other inputs constant.

Average-Total-Cost

The cost per unit of output, calculated by dividing the total cost (fixed and variable costs) by the total quantity produced.